Apple Online Store“The seemingly recession-proof smart phone is suffering from a side effect of the rough economy: Manufacturers simply can’t build enough of the gadgets because chip-makers that rolled back production last year are now scrambling to play catch-up,” Peter Svensson reports for The Associated Press.

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“The chip shortage means Apple Inc.’s rivals are having trouble making enough phones to compete with the iPhone, a problem expected to persist through the holidays. It’s also affecting wireless carriers, some of which are seeing delays in improving their networks, and it could even raise computer prices,” Svensson reports. “There isn’t an across-the-board shortage of chips, but rather problems with certain components here and there.”

“The chip-making industry had a tough start to 2009. February sales were only $14.2 billion, down 30 percent from the year before, according to the Semiconductor Industry Association,” Svensson reports. “Although sales sprang back later in the year, manufacturers were spooked and reined in investment in chip factories. Capital spending plunged 41 percent to $25.9 billion in 2009, after dropping 31 percent the year before, according to research firm Gartner Inc. Total chip production capacity shrank.
Now the factories are having trouble scaling up production fast enough.”

Svensson reports, “Apple is an exception. Although the company can’t keep the iPad and iPhone 4 in stock, it blames that on demand outstripping assembly line capacity, not on problems procuring the right chips. That may be partly ‘dumb luck’ on Apple’s part, Linley Gwennap, president of research firm The Linley Group, said, but it could also be a case of it being ‘good to be the king.’ ‘As a chip supplier, you’re going to service your best customers first,’ he said. ‘If my choice is to try to make Apple happy or some smaller customer of mine, I might take all of my supply and give it to Apple.’”

Full article here.

MacDailyNews Take: It’s hardly “dumb luck” that Apple invested in the A4, which powers both the iPhone 4 and the iPad. Besides being many years ahead at the introductions of the iPhone and the iPad, the A4 is yet another reason why Apple sits in the catbird seat today while the also-rans attempt to compete with off-the-shelf parts.

[Thanks to MacDailyNews Reader "Tom L." for the heads up.]